Letter: Full employment, slumps and other questions (1964)

Letter to the Editors from the October 1964 issue of the Socialist Standard

Full employment, slumps and other questions

Dear Sir.

An article published in the Socialist Standard in January of this year posed a question with its title, namely "Are you better off?" Unfortunately, however, the article does not provide any definite conclusion.

The article does however concede that the average increase of the purchasing power of take-home pay is probably about 10 per cent.

"In the meantime, owing to more than proportionate increases of pay deductions from pay (national insurance and income tax), the average increase of the purchasing power of take-home pay is not the 18 per cent of the two indexes would show (wage rate index and retail price index) but something less, probably about 10 per cent Socialist Standard, page 9, January 1964.”

It might also be pointed out that.the present alleged standard of affluence that many of the working class are at present living at is dependent on their wives going to work in order to augment the family budget. But, notwithstanding, this and other factors such as the tremendous growth in hire purchase commitments, it is difficult to deny that the worker of today is better off if fully employed, as the vast majority are at present, than his counterpart was when unemployed in large numbers before the Second World War, particularly in the slump of 1929. In case it should be asked why one should compare the lot of a fully employed worker to that of an unemployed one in the pre-war period the answer is that millions were unemployed then, and relatively few are unemployed now. The article in question gave four columns of figures, one of which gave the number of unemployed of 1938 when it stood at 1,927,000. The column next to this gives unemployment as a percentage of 1938. this year being taken as 100 per cent. If these figures are accurate, then we may conclude that unemployment has not reached 50 per cent of this level since 1938.

On this aspect of the problem the article in your journal is significantly silent. In fact I think it would be true to say that the Socialist Standard has failed to account for this continuing full employment since the end of the war and does not even find the subject worthy of discussion in its columns.

May 1 therefore ask the following questions?

(a) Why in your opinion has the slump which you maintain is an essential feature of capitalism failed to appear in England?

(b) Why has there been no slump of the magnitude of 1929 since the war.

(c) Are the present conditions of full employment, increasing the membership of your organisation and the sales of the Socialist Standard.

(d) Do you think the orthodox economists using ideas of the late Maynard Keynes have found a way of preventing widespread and profound slumps of the pre 1938 variety and if not how do you account for this rather prolonged period of full employment?

I am, yours etc.

T. Lawlor

Reply:

Our correspondent comments on the fact that, compared with pre-war years, the position of the workers has been affected by the decline of unemployment and the increased number of married women who go out to work, as well as by the rise of average wages in relation to prices. This was referred to in the article, where it was pointed out that total wages are about five times what they were in 1938, “mainly because of the decline of unemployment and the fact that far more married women are now out at work".

Whether this last factor can be regarded simply as a gain is another matter. In the nineteenth century the need of married women to work was commonly regarded as a disadvantage by those who studied its consequences.

If however it is a fact that most workers now are rather better off than before the war, this kind of development is not a new thing. Frederick Engels noted in 1885 that since 1844, when he wrote his The Condition of the Working Class in England, the factory workers had become “undoubtedly better off”, and the condition of engineers, carpenters, joiners and bricklayers, organised in the trade unions, “had remarkably improved". (See Preface to 1892 Edition).

In the same Preface and in the 1886 Preface to Capital Engels then went on to state a position which events proved to be wrong. He had concluded, because of the length and severity of the depression, that British Capitalism would never resume its expansion and that “either the country must go to pieces or capitalist production must ”. He thought unemployment was bound to increase year by year and that shortly, “ the unemployed . . . will take their fate into their own hands ”,

Profiting by Engels' mistakes the SPGB reached the conclusion (one indeed that Marx and Engels had themselves seen) that the achievement of Socialism calls for understanding on the part of the workers and cannot be the outcome of discontent and despair without understanding.

Our correspondent accepts rather too easily the claim that there has been “continuing full employment since the end of the war". In the column of figures to which he refers in the January Socialist Standard it is shown that since the war unemployment has ranged from 302,000 in January 1956 to 861,000 in January 1963. This latter figure may not be high by pre-war standards but it certainly cannot be described as “full employment”. Allowance ought also to be made for the fact that unemployment will have been increased in the nineteen thirties by the big flow of migration into this country. In post-war years up to about 1960 the net flow was outwards.

Against that background we can answer the specific questions.

(a) For this question it is necessary to take care about the use of words. If by “slump” our correspondent means only a “heavy slump” like that of the thirties, the answer is that such heavy slumps are not an essential feature following each capitalist crisis.

What we had as an essential feature o! capitalism is, to quote the words used by Marx in Capital, Volume I, Chapter XV, Section 8: —

The life of modern industry becomes a series of periods of moderate activity, prosperity, overproduction, crisis and stagnation.

The crises, that is the sharp interruptions of booms, have continued to happen in the post-war years. For example, the index of production in January 1963 was down to 108, after having reached 120 in January 1961. If in post-war years, the ensuing “stagnations" have not been heavy and prolonged this is in line with the experience of crises in the nineteenth century. Most of these crises were not followed by heavy prolonged slumps. The outstanding big ones were in the eighteen forties, the eighteen eighties (the one that threw Engels off-balance) and the nineteen thirties, and in between there were depressions that were not heavy or prolonged.

(b) Among the reasons why heavy depression existed in the nineteen thirties and not in post-war years in this country (experience of some other countries has been markedly different) is the absence of a very important factor which existed then. This is the pre-war feature of crisis-dislocation superimposed on the long-term decline of some very big industries, agriculture, coal and cotton without the counter effect of strongly expanding new industries. In post-war years, along with a much larger Civil Service, large armed forces and armaments industry, there has been expansion of building (helped by war-time destruction and stoppage of building), man-made fibres, electricity and electrical engineering, motor car and aircraft manufacture, television, chemicals and oil, electronics and nuclear power.

(c) If this question means has low unemployment since the end of the war been accompanied by a continuous increase of membership, etc., the answer is no; but we would not expect increase of membership to be determined by low unemployment any more than the heavy unemployment of the thirties had that effect. Other factors also come into it.

(d) This question relates to the supposed ability of governments to prevent widespread and profound slumps by means of the techniques associated with the late Lord Keynes. It will put the matter into perspective to point out that also before 1935 (the year Keyne's major work appeared) there were, between the heavy slump, long periods without heavy slumps.

If it is claimed that Keynesian techniques give Governments effective control over capitalism why did unemployment rise to 861,000 in 1963? As all governments have at their disposal these same techniques, and numerous economists who approve of them, why have many countries had heavy unemployment for prolonged periods since the war. among them U.S.A.. Canada. Germany, Italy, Belgium and Denmark? In Italy unemployment ranged between 1½ and 2 million for 10 years after the war. During this year unemployment has been at the 6 per cent level in Canada and U.S.A.

How have the techniques supposed to have worked? The Keynesians claim that the Government can, when it likes, stimulate capital investment and consumption and at other times damp down over-expansion. When the present motor car boom slackens off as it certainly will, what can the government do, if the world market for cars is temporality saturated, except wait for demand to recover? Theoretically the government could have prevented the industry from expanding so rapidly—and left the market to be filled with the cars of other producers—but the car manufacturers, the trade unions and the Tory and Opposition M.P.'s would all have protested.

Now that the Southern Rhodesian tobacco industry has been hit by falling prices following a bumper crop, how can Keynes help them? The producers are in fact turning to another and older technique, that of restricting production.

Of course it long ago ceased to he true that Keynesian doctrines were held only by the unorthodox minority. They had become the orthodoxy of large numbers of economists and members of governments. Now fashion is changing again and Keynes comes under increasing criticism. It would seem that his theories have not proved, even to his admirers, to be the panacea they were claimed to be.

Editorial Committee.